If you do not have an excellent credit score, you may not be getting the best rates for loans or insurance. Millions of Americans have credit score low enough to make obtaining loans and credit cards with reasonable terms difficult. To repair the damage to your credit and increase your credit score, follow these steps.
Obtain An Accurate Credit Score
In order to begin improving your credit scores, you must first know where you stand on the credit scale. You can get free credit reports once a year, but you typically have to pay to see your FICO scores. If your credit score is anywhere below 700, you should begin to work on improving your numbers.
Apply For A Credit Card
If you do not already have one, apply for a credit card so that you can begin establishing a good credit history. You do not have to carry a balance on the credit card to earn a good credit score, just use the card occasionally and pay off the balance in full. If you are unable to be approved for a regular credit card, consider obtaining a secured credit card, where the issuing bank gives you a credit line equal to the deposit you make. Secured credit cards are also reported to the three major credit bureaus.
Apply For An Installment Loan
The best credit scores are reserved for those that show responsibility with both revolving and installment credit. If you do not have an installment loan reflected on your credit reports, you may want to consider adding a small personal loan that is paid back over time. The best deals will probably come from a community bank or credit union and you will want to ensure that the loan will be reported to all three bureaus.
Pay Down Your Debts
Paying off your revolving accounts, such as credit cards, can help your credit scores dramatically. The gap between the amount of credit you are using and your available credit limits is a large part of the calculation for your credit score and the bigger the gap, the higher your credit score will be. Getting your balances below 30% of the credit limit on each card should be your goal.
Increase Your Credit Limits
If you are eligible for an increase in your credit limit, accepting the limit increase can raise your credit score. However, it is important to remember that just because your credit limits are higher does not mean that you have to spend more. Keep your spending on credit cards to a minimum and try your best to pay off the balance each month so that you do not begin to accumulate large amounts of debt.